Fiercely independent Switzerland is not a member of the EU, but has adopted large sections of EU policy.

The European Commission said it regretted the outcome of the vote and would examine its implications.

Freedom of movement is a key pillar of the EU single market - a market which accounts for more than half of Swiss exports.

The BBC's Imogen Foulkes in Geneva says the vote has shown up traditional divisions, with French-speaking areas in the west against the quotas, German-speaking regions divided, and the Italian-speaking canton of Ticino firmly in favour.

In addition, cities with higher than average numbers of foreigners - Basel, Geneva and Zurich - voted against the quota proposal, while rural areas mostly voted for it.

Switzerland's economy is booming at the moment, and unemployment is low, but many Swiss worry about immigration.

Last year 80,000 new immigrants arrived in Switzerland, and foreigners now make up 23% of the population. It is the continent's second highest foreign population after Luxembourg.

Analysis

Imogen FoulkesBBC News, Berne

In Switzerland there is a feeling of nervousness, nearly all the newspapers are expecting a difficult period in Swiss-EU relations.

The justice minister will have to try to persuade Brussels that, while Switzerland has decided against free movement of people, it still wants various other EU perks, such as access to Europe's single market. That won't be easy.

Sunday's vote on immigration shows again that national unity, let alone consensus, is really rather fragile, and addressing this will also be a tricky task.

But under the Swiss system of direct democracy, the people's word is final: even though the majority was tiny, the proposals must now come into force.

In a statement, the European Commission said the Swiss vote "goes against the principle of free movement of persons between the EU and Switzerland.

"The EU will examine the implications of this initiative on EU-Swiss relations as a whole."

EU Justice Commissioner Viviane Reding told the Financial Times that "the single market is not a Swiss cheese - you cannot have a single market with holes in it".

Mr Fabius told French radio it was bad news "both for Europe and the Swiss". Europe "was going to review its relations" with Switzerland, he added.

The German foreign minister said the vote had to be taken seriously: "This proves a little bit that in this globalised world people feel more discomfort towards unlimited free movement of persons."

Renegotiation?

European Parliament President Martin Schulz - a German Socialist - expressed disappointment over the vote. He said the EU would "perhaps [have] to renegotiate the agreement" with Switzerland. But he warned that unpicking freedom of movement from other single market freedoms, for example services, would be difficult.

"It is up to the Switzerland government to decide if they want to suspend the agreements with us or not."

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Martin Schulz, President of the European Parliament: "We have to react and... perhaps to renegotiate the agreement with Switzerland"

Switzerland's bilateral agreements with the EU took years of negotiation to achieve. Our Berne correspondent says that abandoning free movement could limit Switzerland's access to the single market.

Corriere del Ticino: "The referendum: doom and gloom from the experts"

Since 2007, most of the EU's 500 million residents have been on an equal footing with locals in the Swiss job market - the result of a policy voted into law in a 2000 referendum. But a movement led by the SVP now wants to reverse this deal, saying it was a huge mistake.

The initiative means employers should in future give preference to Swiss passport-holders.

But the Swiss government and business leaders say free movement is key to Switzerland's economic success, allowing employers to choose skilled staff from across Europe.

European politicians' dismay was echoed in some leading newspapers on Monday.

Belgium's Le Soir said "it's the whole scaffolding of Switzerland's bilateral accords with the European Union which is assured of collapse".

And Spain's El Pais said the Swiss had not only questioned their agreement with the EU, but the vote "also reflects the populist and xenophobic agitation sweeping the Old Continent less than three months before the European elections".

The vote is reverberating in other European nations debating their immigration policy

Comments

Comment number 545.

Withnail10th February 2014 - 21:52

Having visited Switzerland many times it is understandable that the Swiss would want to protect their children, shared communal values and quality of life. They will still want talented and capable people, but not economic migrants. Switzerland has demonstrated again that it values the views of its well educated people and is willing to stand against bullies (Swiss redoubt). Hup Schweiz!

Comment number 404.

DiDi 10th February 2014 - 16:37

As a long time foreigner living in Switzerland, I have seen quotas and open borders. This opens the way for talented people from outside Europe again, namely US and Asia. Under EU agreement we were forced to employ only Europeans. Switzerland will do just fine. 50% of trade is outside EU. Maybe time for Brussels to do some soul searching and ask why instead of threatening.

Comment number 319.

Joisapo10th February 2014 - 15:11

After reading the comments of all Swiss people here below and hearing and feeling the sense of victory among Swiss, not only farmers, but co-workers in large multinationals, the message is quite clear: let us be on our own, we will be just fine. The EU should simply agree to the country's clear statement and let the EU-Swiss agreement(s) fall. There is no point in dragging a broken love affair.

Comment number 305.

Love Your Government10th February 2014 - 15:00

There is too greater difference in the standard of living between European countries. We need to help the economies of poorer countries then you won't get mass migrations. We could start but not enslaving populations in debt they cannot possibly pay off by introducing positive money into their economies. All governments need to do is digitally create money and use it on infrastructure, NOT QE.

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